Eighth Circuit Reverses $5 Million Award Against My Pillow Guy Mike Lindell

Two years ago, we brought you an account of an arbitration ruling against Mike Lindell, who challenged contestants to prove him wrong in his claims that the 2020 Presidential election was stolen. Robert Zeidman took up the challenge. A Trump supporter, Mr. Zeidman nonetheless thought he had shown that the files that Mr. Lindell offered up as proof that the election was stolen in fact had no data relevant to the election at all. A panel of arbiters agreed and so did not reach his two alternative grounds of recovery. That is, the panel did not opine on the claim that, if the contest rules were construed as Mr. Lindell maintained, they would be unconscionable. Nor did the panel reach the claim that the contest amounted to consumer fraud because there could be no winner. A District Court affirmed the award, and Mr. Lindell, acting through Lindell Management LLC (LMC), appealed to the Eighth Circuit.

In a gobsmacking unanimous opinion in Zeidman v. Lindell Management LLC, the Eighth Circuit reversed the District Court’s grant of Mr. Zeidman’s motion to confirm the award on the ground that the arbitral panel had consulted extrinsic evidence to construe the relevant contest rules. The District Court had reached similar conclusions about the impropriety of the arbitral panel’s approach, but it had concluded that “even the potentially serious legal error of using extrinsic evidence to interpret an unambiguous term is not enough to vacate an award,” because the panel “was arguably interpreting and applying the contract.” In the Eighth Circuit’s view, the panel had not merely committed legal error, it had exceeded its powers, and thus its award could not be confirmed.

The real mistake of the arbiters was declaring the agreement to be unambiguous when it was in fact ambiguous. Section 1 of the contest rules provided as follows:

[LMC] has created a Challenge where participants will participate in a challenge to prove that the data [LMC] provides, and represents reflects information from the November 2020 election, unequivocally does NOT reflect information related to the November 2020 election (the “Challenge”). . . .

This language suggests that participants must prove that the data provided was not related to the November 2020 election in any way.

Section 5 of the rules used different language:

Participants must . . .  prove[] to a 100% degree of certainty that the data shown at the Symposium is not reflective of November 2020 election data.

This language suggests that the data must be election data and not just data related to the election.

The panel resolved the ambiguity by consulting extrinsic evidence in which LMC acknowledged that it was really claiming that its data was election data and not just data relating in some way to the 2020 election. If the panel had just acknowledged the ambiguity, I’m not sure on what basis the Eighth Circuit would have objected, and since the problem is really technical and not substantive, I don’t see the harm. In fact, construing “data” to mean any information related to the election makes no sense because only election data could be a basis for a claim that the election was stolen.

When parties agree to arbitrate, they agree to abide by the arbitral panel’s decision. Limited grounds for setting aside an arbitral decision are set forth in § 10 of the Federal Arbitration Act (FAA), and the panel found a ground in § 10(a)(4), which allows a court to vacate an arbitral award if the panel exceeded its powers. Interpreting contest rules relevant to the enforcement of an arbitration agreement does not exceed an arbitral panel’s powers. It does not matter that the federal court disagrees with the panel’s conclusions. It does not matter that the federal court disapproves of the panel’s interpretive methods. If a federal court can characterize each legal error as exceeding a panel’s powers, the FAA becomes a dead letter, as courts can always follow this precedent and refuse to enforce an arbitral award of which it does not approve.

The Eighth Circuit remanded the case with direction to either grant LMC’s motion to vacate the award or for further proceedings not inconsistent with the Eighth Circuit’s opinion. Mr. Zeidman could petition for SCOTUS review, but that seems unlikely. SCOTUS rarely takes a case just to correct a legal error by an appellate court. At this point, could the parties return to arbitration? Could the panel consider Mr. Zeidman’s two alternative arguments?